WARNING: Buy Now, Pay Later Scams on the Rise
Scammers are targeting the small-dollar, short-term credit product
Buy Now, Pay Later is everywhere — from online retailers to traditional stores — even groceries.
It’s no surprise, then, that scammers have found ways to game the system — leaving both retailers and customers on the hook for their antics.
Scambusters reports on the growing number of Buy Now, Pay Later fraud schemes.
Scammers use two main tricks to fool retailers.
They hijack existing BNPL customers’ accounts, either by phishing or buying a person’s confidential information, like Social Security numbers, on the black market.
Or they open accounts by creating fictitious or synthetic identities by combining details of different people into a single persona — “Frankenstein identities” as they’re sometimes called in the financial security world.
Consumers are typically unaware until it’s too late — and then they are left to dispute charges with a retailer:
Mostly, the crooks use these accounts to make big purchases, sometimes delivered to “drop” addresses. These are usually either vacant properties or belong to people who innocently agree, for payment, to forward received items abroad. Fake addresses and porch piracy at genuine addresses are also used.
Oftentimes, consumer victims don’t know they’ve been caught up in this web until they get a demand for the second staged payment — or they find an item on their doorstep that they didn’t order.
The rise of fraud in the Buy Now, Pay Later space is just one more reason the short-term loans should be regulated like traditional credit — complete with “truth in lending” protections and rules to protect both retailers and consumers.
Buy Now, Pay Later is growing in popularity, especially in an age of rising inflation and stagnant wages.
Consumers would be wise to be wary of using the product — while it IS convenient, it also carries risks — and those extend beyond fraud:
One survey indicated:
32% of Buy Now Pay Later plan users have had to skip paying an essential bill such as rent, utilities or child support in order to make their payments. Even after that, 30% report that they’ve struggled to make their payments.
That same survey also noted:
More than 45% of Americans have now signed up for at least one Buy Now Pay Later plan. That’s compared to 31% as of April 2021 — a 41% increase in usage over 10 months. Of those who’ve used the plans, 22% regret their decision, saying they wish they’d never signed up for a plan at all.
More than 50% of respondents have been paying off multiple Buy Now Pay Later plans at one time.
Multiple short-term loans that lead to skipping bills and a cycle of debt inevitably become a source of regret — and a drag on a personal budget.
Yes, regulators should extend some basic protections to BNPL products and at the same time, consumers should exercise extreme caution in using them.
As I wrote this, I couldn’t help but think about this piece from SNL:
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